Comparable transactions

In 2010, Providence Equity Partners acquired Virtual Radiologic Corporation, which is an online clinic that provides radiologist analysis through a virtual network. It was sold for a price of million and an enterprise Value of $242 million.^[3] To evaluate a similar unsold company, we would look at what are called the transaction multiples.

One popular transaction multiple is EV/EBITDA. For Virtual Radiologic Corporation, the EBITDA at the time of the transaction was $20 million, giving an EBITDA multiple of 12.1x. A similar unsold company, which has EBITDA at $10 Million could expect to be sold for $120 million. In some market segments, the companies do not have high EBITDA, and sometimes a multiple based on revenues (EV/sales) is used instead. To get a more accurate valuation, one should look at the multiples of more than one similar deals that are relatively recent since multiples do change from year to year.